Fred Adcock, executive vice president of Subaru of America, has a high, spacious office in the car company’s Cherry Hill, N.J., headquarters. Its picture window provides a view of the Cooper River and a little park on its near bank. The vista is as soothing as Adcock’s residual Southern drawl.
“If I had an office like this, I don’t think I’d go home,” a reporter noted.
“Yes, you would,” Adcock replied.
Adcock has a lot less reason than he once did to want to escape from this place.
In the early ’90s, Subaru was bleeding profusely, and dipping its ledger pen in the red pools forming on the counting house floor.
But a marketing move in the mid-’90s–creation of a new kind of car-based sport-utility vehicle called the Outback–triggered a turnaround at the little car company. Sales rose to 172,216 in 2000 from 100,407 in 1995.
Additionally, it has formed a far-reaching alliance with General Motors Corp. that promises to reduce its parts and development costs and is fielding a more powerful, 6-cylinder version of the Outback.
“At the moment, Subaru is doing everything right,” said William Pochiluk, head of AutomotiveCompass.com, a West Chester, Pa., research and consulting firm.
That it wasn’t always doing everything right might explain why Adcock is gray at 48.
The problem for Subaru in the early ’90s was twofold, according to the executive vice president. The yen had hit the fan, leaving the Japanese automaker with unfavorable exchange rates. And the company had abandoned its role as a niche marketer.
“Our slogan used to be `Inexpensive and built to stay that way,”‘ Adcock recalled. “But in the early `90s, exchange rates were such that we no longer could be inexpensive. We couldn’t compete on price. We couldn’t out-Toyota Toyota.”
To survive, the company had to concentrate on things it could do better than anyone else, he said. “So, what were our aces? Wagons and all-wheel drive.”
The company decided to return to its niche roots in four-wheel-drive, and phase out front-wheel-drive models. Then, Subaru’s managers, marketeers and designers put their heads together and came up with the idea of combining the wagon and all-wheel-drive.
In 1994, the company put experimental AWD wagons in several regions for consumer tests. There were four models reflecting as many recreations and lifestyles: Alpine, Sun Sport, Outdoor and GT.
Based on customer feedback, a design team headed by Ron Will, the company’s manager of advanced design and vehicle concepts, came up with the Outback.
The Outback, a jacked-up midsize Legacy wagon with macho sport-ute styling cues, was an success.
It was also an industry breakthrough. Up until the Outback, sport-utes had been truck-based vehicles with the kind of ride and handling associated with trucks. By building a sport-ute on a car platform, Subaru created a genre of vehicle that rode and handled more like an automobile.
While Subaru’s success has been largely fueled by its invention of the car-based sport-ute, other factors are at work, according to Pochiluk. One is the way the company fashioned a brand identity based on its wagon and AWD expertise.
“To Subaru’s credit, it built a brand concept and stuck with it,” he said. “And that’s important. A lot of its competitors are jumping all over the map trying to define themselves, and Subaru hasn’t. [They] seem comfortable with their definition of themselves.”
Pochiluk said he thought Subaru also contributed to its recent success by getting a lot of mileage out of a limited amount of advertising and marketing money.
Despite its return to profitability, Subaru had faced a limited future as the ’90s drew to a close. Such a small company has little money to spend on product development and can’t enjoy economies of scale when it buys parts and tooling.
That problem was addressed last spring, when GM bought a 20 percent chunk of Subaru of America’s Japanese parent, Fuji Heavy Industries Ltd.
Adcock said the alliance would offer valuable advantages to both companies and allow Subaru to remain “true to its nature.”
The Subaru executive also said that being allowed to use GM’s purchasing muscle would be “a huge benefit” to his company. So would access to GM’s engineering resources and emissions expertise.
GM also stands to benefit handsomely. The connection will give it access to Subaru’s dealer network, for openers. It also will have an opportunity to get up close and personal with Subaru’s experience in all-wheel-drive systems, horizontally opposed engines and continually variable transmissions.
“I hope they have the good sense not to stray too far from what they have become,” Pochiluk concluded. “That’s how they got in trouble the last time.”
